Annuity in Advance

A series of equal payments or receipts of cash that are received at the beginning of each period.

 

It is called an annuity in advance because the first payment is made before any time passes and the compound interest tables do not apply to the first payment.

 

Example:

 

A buyer purchases rental property.  The terms of payment are an annuity of $10,000 per year for 20 years with the first payment to be paid in advance.  This means that the buyer is paying $10,000 now and $10,000 per year at the end of the next 19 years.  

 

This is not really a 20 year annuity.  This is actually a 19 year annuity of $10,000 per year with a down payment of $10,000.

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